The SEC has lanched a probe into AOL’s deal with Purchase Pro. The probe is part of a wider investigation on the accounting practices of AOL.
The SEC investigation was triggered by reports from the Washington Post, which claimed AOL used unorthodox methods to account for a few of its deals, when its ad revenues began to decline in late 2000. In one of its dealings with PurchasePro, it is alleged that AOL paid $9.5 million cash for $30 million in PurchasePro stock warrants, then recorded the difference of $20.5 million as ad and eCommerce revenue.
AOL seems relaxed with SEC investigations. CEO, Richard Parsons said the company was happy with what the Post wrote on its accounting methods, its practices are in accord with the general accounting principles, and were signed off by Ernst & Young.
Despite AOL and PurchasePro parting ways in September 2001, with AOL paying PurchasePro $1.5 million, rather than the $20.7 million it would have otherwise had to pay, both companies plan to work together on opportunities that will benefit both companies.